Moral Hazard vs. Systemic Risk

Mar 25th, 2009

From time to time there are those decisions/situations that come along, that challenge us to truly examine our morals/values/ideologies. If we are in a position of power, those morals/values/ideologies could have ever-lasting repercussions on many people.
In Henry Paulson & Ben Bernanke’s case, it was billions of people; their ‘trigger’ moment was the battle between Moral Hazard & Systemic Risk.
I know that we can all get carried away about the large sums of money being thrown around, while trying to figure out who created this mess to cast blame, but sometimes we should just take a step back and appreciate the tough task that our regulators and political figures have in front of them.
PBS’s Frontline did an excellent documentary that takes us deep inside the financial crisis with key players. Representatives Barney Frank & Chris Dodd explain the scene in the room when Bernanke and Paulson told the leaders of the House and Senate that the entire financial system could collapse…in a matter of days. Who knew that a documentary could feel like a horror/suspense movie?…that financial decisions could be felt with the same weight as a Mafioso boss trying to decide what to do with the mole that he found within his organization that also happens to be married to his daughter?
I know that it’s an hour long, but take the time, watch it and enjoy. It’s well worth it.